††††† NECESSITY,
FUNCTION, AND CONFORMITY: KRS 131.130(1) authorizes the Department of Revenue
to promulgate administrative regulations to administer and enforce Kentucky's
tax laws. This administrative regulation establishes requirements for
application of the sales tax to transactions involving the federal government..

††††† Section 1. The
term "federal government" as used in this administrative regulation shall
mean federal agencies, instrumentalities, or corporations which are exempt from
all state taxation under the Federal Constitution or statutes, and shall not
include an agency, corporation or instrumentality that is simply regulated by
or receives funds or grants from the federal government.

††††† Section 2. The
exemption applies only to sales made directly to the federal government for use
in the government function. Any official or employee who uses a position to
make a tax-free purchase for personal use or that of any other person shall be subject
to the penalties provided in KRS 139.990 and other applicable laws.

††††† Section 3. Sellers
and retailers shall include sales made directly to the federal government in
the gross receipts entered on line one (1) of the retailer's Kentucky Sales and
Use Tax Return (Form 51A102). Sellers or retailers may deduct these sales on
line six (6) of the return. Sellers or retailers claiming a deduction for sales
to the federal government shall maintain in their records a copy of the
exemption authorization letter issued to the federal agency and a copy of the
invoice upon which an official, or an employee exercising comparable authority,
of the federal government has signed and acknowledged in writing that delivery
of the property was actually made to the federal government.

††††† Section 4. Contractors
may not claim the exemption when purchasing property to be used in fulfilling
contracts with the federal government. As provided by 103 KAR 26:070, sales of
property to contractors for use in fulfilling contracts with the federal,
state, or local governments for erecting, remodeling, or repairing structures
or improvement on or to real estate are subject to tax.

††††† Section 5. All
federal government agencies seeking exemption under authority of this
administrative regulation shall apply to the Division of Sales and Use Tax for
a tax exemption authorization letter. The application (Form 51A125) may be
obtained from the Division of Sales and Use Tax, 501 High Street, Frankfort,
Kentucky 40620 or from one (1) of the departmentís field offices.(3 Ky.R. 716; eff.
7-6-1977; TAm eff 6-22-2016; 44 Ky.R. 1103, 1497; eff. 2-2-2018.)